Credit rating agency Moody’s has cut its credit rating for the D.C. government from its top Aaa rating to Aa1 and revised its outlook to “negative,” citing the effects of federal government job and spending cuts on the District’s economy.
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D.C. first earned Moody’s top credit rating in 2018. Moody’s put the District’s status on watch in March, as did Fitch Ratings and S&P Global Ratings.
“The negative outlook reflects the increased likelihood of further federal spending and workforce cuts and the District’s declining commercial real estate market, as well as the high degree of uncertainty regarding federal government policy changes,” Moody’s said.
The downgrade by one notch will increase borrowing costs for D.C.
The District could lose as many as 40,000 federal government jobs, or 21% of the federal government workforce, which Moody’s said will erode the stability that D.C. has always enjoyed from the federal government’s presence.
D.C. Chief Financial Officer Glen Lee issued a statement after the Moody’s downgrade, saying it is not the result of degradation of the District’s strong governance and fiscal management practices.
“Rather, it stems from broader federal decisions regarding its workforce and spending, and economic trends that are beyond the District’s control and are having a disproportionate impact on the local economy,” Lee’s statement said.
D.C. is already grappling with its own financial setback as it searches for ways to cut its budget by $400 million brought on by Congressional cuts. The Senate has approved restoring the city’s fiscal year budget, but the House has so far not acted.
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